‘Dot eu’ carve-up as firms swoop for web addresses

Date: 13/04/06

The launch of the .eu domain name on 7 April has surpassed expectations, but already a backlash has started from critics who claim that the system is open to abuse.

By Wednesday 12 April - six days after the European domain name was opened to everyone - nearly 1.5 million domain names had been registered and the European Commission had hailed the operation as a huge success.

"There were more registrations in two days than we expected for a whole year," said Commission spokesman Martin Selmayr.

But there have been complaints from some companies that the system has been hijacked by speculative firms carrying out a practice known as 'warehousing' - buying up huge numbers of web names that they then plan to sell far above the price of 10 euro charged by EURid, the company employed by the Commission to control the system.

Only accredited firms, known as registrars, can apply for domain names on behalf of their clients, on a first-come, first-served basis. The problem, the critics say, is that the rules for becoming a registrar are too simple. A firm only has to prove that it is an established business and leave a 10,000 euro deposit with EURid that is then used to apply for domain names.

As a result some of the 1,500 registrars have multiple companies, which gives them a vastly inflated chance of winning domain names. For example there are nine companies registered to the same address in Sternberg, Germany, and one address in New York is home to at least 30 registrars.

Critics claim that these companies are abusing the system by establishing several companies in one place.

"Under the EU regulation which controls all this, there are provisions that a registrar will not warehouse names, and yet there are companies that have literally bought up hundreds of three- and four-letter domain names to sell on for an inflated price," said Nick Wood, chief executive of Com Laude, a UK-based registrar for trademark owners.

He sits on the board of Marques, the European association of brand managers, which has already complained to the European Commission that the system was too open to abuse.

"These companies have basically exploited the poor drafting in the regulation and EURid should have seen it coming. Ultimately it's a shame for Europeans, who have been robbed of domain names at a reasonable price," said Wood.

But the Commission insists that the accusations are merely sour grapes from those who have not won the domain names that they wanted. "There is nothing to stop people setting up more than one company to have a better chance of winning a domain name," Selmayr said.

"And it is not surprising that those that did not think to do it are now complaining, but we live in a free market society and there is nothing wrong with it."

If there are suspicions that some companies have been warehousing names in bad faith - which would include buying up thousands of names randomly, which is illegal under the EU regulation - EURid could refuse to register a name or revoke any that have been already assigned. "We have a very tight legal system that people can go through if there is a problem," Selmayr said.

EURid spokesman Patrik Linden said that the system was fair. "It's possible and indeed quite likely that there have been multiple companies set up, but clients are not disadvantaged by this. The person with the most access to the system is likely to be more successful but this is the way that the world works."

In its letter to the Commission, Marques pointed out that, as the lowest cost of filing a complaint is around 2,000 euro, many small businesses would find it difficult to take action against fraud and asked EURid to take "preventative and cautious action".

Wood said: "We hope that EURid and the Commission will investigate who is behind this speculation and if they are in breach of the terms and conditions of the registry, take appropriate action."

Article reports on the public launch of the .eu domain name on 7 April 2006, which in surpassed expectations in terms of numbers of applications. At the same time critics claimed that the system was open to abuse and that practices known as 'warehousing' meant the system had been hijacked by speculative firms.

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